With the Amarnath crisis weighing heavily, Prime Minister Manmohan Singh [Images] on Friday warned that dividing people in the name of religion could threaten the country's unity and asked political parties to come together in finding a permanent solution to problems of Jammu and Kashmir [Images].

He also appealed to the people of J&K to cooperate in establishing peace and resolving all issues only through dialogue.

Addressing the nation on the 62nd Independence Day from the heavily-guarded ramparts of Red Fort [Images], Singh, who has come under attack over soaring prices, said his government was taking "determined" measures to bring them under "reasonable control".

Bringing cheers to lakhs of government employees and armed forces personnel, Singh announced that government has gone "beyond" the recommendations of the Sixth Pay Commission in increasing their emoluments.

Turning to the challenges posed by communalism, extremism and fundamentalism, he said "politics of consensus, not confrontation" was required and cautioned that a divided nation cannot overcome them.

In his 45-minute speech, the Prime Minister spoke about last month's terror attack on the Indian Embassy in Kabul and said it had cast a "shadow over the efforts to normalise relations with Pakistan".

He made it clear that New Delhi [Images] will not be able to pursue peace initiatives with Islamabad [Images] if the issue of terrorism is not addressed.

Pointing out that in many developing countries inflation is double of the rate of price rise in India, Singh said the government has taken special measures to "insulate the poorer sections of society from the full impact of rising food and fuel prices."

At the same time the Prime Minister underlined the importance of growth for fighting poverty and employment generation.

Strongly defending his government's decision to pursue the Indo-US nuclear deal, the Prime Minister said the agreement would end India's nuclear isolation and open up new pathways for industrialisation of the country.

"The nuclear agreement that we are negotiating with developed countries will end India's nuclear isolation. It will open up new opportunities for trade in dual-use technologies, opening up new pathways to accelerate industrialisation of our country," he said.

The nuclear agreement awaits clearance from the 45-member Nuclear Suppliers Group and the US Congress before it can come into effect.

He said a growing economy would need energy which should come from clean and environment friendly sources. "All over the world there is growing realisation of the importance of atomic energy to meet the challenge of energy security and climate change.

"It is a clean, environmental friendly and renewable source of energy," he said.

Stressing that the government has given a "new deal to rural India", Singh said the stagnation in agriculture, especially from 1998-2004 (the period of NDA rule) has given way to revival of the farm sector.

"After almost a decade of stagnation, especially from 1998 to 2004, investment in agriculture is increasing and there has been a revival in this area," he said.

Singh made it clear that Pakistan would have to end cross-border terrorism, saying without the issue being addressed "all the good intentions that we have for our two peoples to live in peace and harmony will be negated.

"We will not be able to pursue the peace initiatives we want to take. The terrorists and those who support them are enemies of people of India and Pakistan, of friendship between the two countries and of peace in the region and the world. We must defeat them."

Singh said India was seeking a peaceful, stable and prosperous neighbourhood and its foreign policy is based on these principles. "We wish all our neighbours well."

Touching on the economic front, he said the RBI was moderating the money supply growth to control inflation. "However, while making these efforts we should avoid doing anything which hurts our growth".

"I know how much each one of you is concerned about the recent rise in prices. The inflation we have seen this year is basically due to external factors. All over the world and in global markets the price of food, fuel and other commodities has been rising... We are taking determined measures to bring prices under reasonable control," Singh said.

"Our economy must grow at the rate of at least 10 per cent every year to get rid of poverty and generate employment for all," he said.Singh said he has sought cooperation from the states to tackle inflation. "I have urged all Chief Ministers to improve and strengthen the Public Distribution System (PDS) to ensure availability of essential commodities to the common man at reasonable prices," he added.

He said the government has formulated a new Rehabilitation and Resettlement Policy which would ensure that there is reasonable compensation and proper rehabilitation of rural people in the process of industrial development. Parliament's approval will be sought for it, he said.